Abstract
AbstractDemand equations in real income and nominal prices can be obtained directly by differentiating a cost function in which output is replaced by real income. This derivation is possible because recent advances show that certain index numbers provide close approximation to real income without knowledge of the utility function parameters. Three flexible functional forms corresponding to well‐known flexible cost functions were used to estimate food demand elasticities. Time‐series and cross‐sectional data from ten Indian states for twenty years were used. The estimates provide a complete set of expenditure, price, and cross‐price elasticities for four commodities, some close substitutes.
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